Making a Bullish Case for Advanced Micro Devices

Although I have been bearish on Advanced Micro Devices (AMD) due to the stock’s recent rally, in this article, I will be penning down some positives about the company.

Nowadays, the virtual reality market is gaining a lot of traction. If you are willing to use a high-end virtual reality headset like Oculus Rift or HTC Vive, it is mandatory to have a PC powered with a high-end graphics card that supports virtual reality. However, at present, Advanced Micro Devices and NVIDIA are the only two giant players in the graphics cards industry.

Both the companies have launched their new architecture this year which comprise significant changes compared to their prior generation.

However, Advanced Micro Devices is aggressively focusing on mainstream market, as it launched its Radeon RX 480 specifically for mainstream users.

The company’s RX 480 has received fairly good reviews and has given the company an opportunity to gain back some market share from NVIDIA. It still remains to be seen if Advanced Micro Devices can make the most of this opportunity, nonetheless, it’s a positive for the company. RX 480 is efficient and capable of powering prevailing virtual reality headsets and is available for just $199.

RX 480 is the most affordable graphics card available today as well as 25 percent cheaper compared to NVIDIA’s GTX 1060.

Image by Republica / Pixabay

Moreover, Advanced Micro Devices can also gain huge advantage from Sony’s upcoming PlayStation VR. As a matter of fact, the company’s chips powers the PlayStation 4 and escalated demand for PS4 could eventually result into surplus revenue.

Zen Architecture

Apart from launch of Polaris architecture in GPU segment, Advanced Micro Devices is also on its way to launch its new Zen architecture for CPUs. Zen architecture also comprises of substantial improvements, mainly its shift from 28 nanometer process to 14 nanometer FinFET silicon technology.

Zen plays a very significant role for Advanced Micro Devices as it can help it gain some market share back from Intel as well. Intel is the leader in the CPU market and Advanced Micro Devices’ existing market share of 18 percent is limited by the low performance 28 nanometer processors it presently manufactures.

It is true that Zen will not be able to defeat Intel, but more importantly, it will permit the company to address a bigger share of the market compared to its prevailing chips.

Considering Advanced Micro Devices’ recent quarterly results, it seems like the company’s strategy of focusing on mainstream users has already started paying off. Moreover, the company is on its way to launch some new Polaris based graphics cards that will certainly help the company to gain market share from its foremost rival NVIDIA.

Conclusion

While there are many positives for Advanced Micro Devices, the stock has already priced in all of it and maybe more. I am bearish on the stock primarily because of its recent triple-digit rally and expect the stock to head lower despite the positives.